there must be something that can be deone....i am in a stick situation right now too
Total Comments: 24
Posted: Fri Feb 05, 2010 07:01 pm Post Subject: wording for a minor beneficiary
when you want to have a minor as a beneficiary, what wording do you use to have the insurance or 401k proceeds go to a trust or to name a trustee?
Posted: Fri Feb 05, 2010 08:46 pm Post Subject:
Two different issues here.
401(k) proceeds are controlled under federal law. A person's current spouse is the de facto beneficiary unless he/she signs away that right. A divorced spouse might be entitled via a "court order," but even so, the court order is not really superior to federal law. The new spouse would still have to sign-off on the benefit.
Life insurance is an entirely different matter. Although a few states' beneficiary laws are reminiscent of the 19th century, in most states, a person is free to name anyone or anything as their beneficiary. This includes minor children. However, minors generally do not have the "legal capacity" to manage their own money, and insurance companies will rarely pay any money directly to a minor.
A competent attorney -- one who specializes in wills and trusts -- can help with such a situation as you are describing. If a life insurance trust was created for the benefit of the child(ren), the beneficiary statement would be something like: Primary beneficiary "The John & Mary Smith Irrevocable Life Insurance Trust, dated, February 5, 2010".
Simple. It's the language of the trust document that is all important. That document will define the beneficiary(ies) of the trust, their share of trust assets, who the trustee is, and perhaps detaill when and how the assets of the trust may be paid to or used by/on behalf of the trust beneficiary(ies). This is NOT something that can easily or normally be described in a life insurance policy's beneficiary statement.
You would definitely NOT want to name a (natural/living-breathing) person other than the minor child as the "trustee" because doing so would make the policy proceeds the property of that person, and not that of the child. The child would essentially be powerless to claim against the proceeds. "William Smith (an adult) for the benefit of Tommy Smith (a minor child)" could be used, but is not the best recommendation. What happens if William predeceases the insured or the minor child, and no new beneficiary is named before the insured dies? Turmoil.
Beneficiary statements are among the most important aspects of a life insurance policy, and need to be done correctly, and precisely, to avoid any conflict after it's too late to make any corrections (after the insured's death). This is also one of the least well understood areas of life insurance by agents.
A truly competent attorney, certified in wills, trusts, and/or estate planning, is you're best bet.
Posted: Sun Aug 01, 2010 12:38 am Post Subject: Please help
My 35 year old brother passed away unexpectedly and left his nine year old son behind. At the time of death he had full custody of his son because the biological mother has a serious drug problem. Upon death, custody reverts back to the biological mother.
He was married for less than a year to his new wife who was listed as the primary beneficiary on his life insurance. I am listed as the "second benefactor" on the policy and before he was married I was listed as primary for about 5 years. My brother and I at that time had a verbal agreement that all of the proceeds would be used for my nephew and disbursed throughout his life as needed, (college, car , wedding ETC.) I have recently learned that the new wife has no plans of leaving my nephew any of the life insurance proceeds and also has no interest in maintaining a relationship with my nephew. In fact my nephew went over to the house "his father's house after the funeral and she asked him if she should box up his things for him and she would not let him take any sentimental belongings of his fathers.
My question is how do I contest this life insurance payout and what are my chances of winning?
_________________
Posted: Sun Aug 01, 2010 01:37 am Post Subject:
My question is how do I contest this life insurance payout and what are my chances of winning?
You don't contest the beneficiary, because your chances of winning are about 0.05%. You would have to be able to prove something on the order of coercion or duress to get him to do what he did. The courts are not going to entertain other "thoughts" the owner may have had, because that is only speculation. The beneficiary designation is in writing.
It's unfortunate that your brother chose to take care of his "new wife" and not his son, but apparently that was what he intended when he made her the primary beneficiary, and you the contingent beneficiary. Why he did not list his son in either of those positions only he knows for sure.
If your nephew could prove that his father received bad advice about beneficiaries from the life agent, he might have a claim against the agent, but not the insurance company or the "new wife"/stepmom.
Posted: Sun Aug 01, 2010 02:54 am Post Subject:
If your nephew could prove that his father received bad advice about beneficiaries from the life agent, he might have a claim against the agent, but not the insurance company or the "new wife"/stepmom.
I would say negative. Agents do not give legal advice; this would fall under legal advice in most states. We'd be opening a huge can of worms if someone decided it was the agent's responsibility to ensure that the client had the proper beneficiary designations. That's one of those "in an ideal world" type of situations, but the other things that would have to also exist for that ideal world never will, so no use.
Posted: Mon Aug 02, 2010 12:06 am Post Subject:
Agents do not give legal advice
While giving "legal" or "tax advice") is not something agents are supposed to do, the fact is that agents are called upon all the time by clients to "assist" them in crafting beneficiary designations. Most agents do not realize or appreciate the importance of what they do or lead clients to do, and they often advise clients improperly when it comes to naming beneficiaries.
There would be no need for continuing education courses such as "Beneficiaries and Beneficiary Designations" or "Problematic Beneficiary Designations" if it were not so.
it was the agent's responsibility to ensure that the client had the proper beneficiary designations.
While the premise is correct, that the responsibility to ensure the correctness does not fall on the agent, if the client explains his desire, the agent words it as he thinks he "understands" it but never counsels the client to check with an attorney to verify that it is correct, the agent has committed an act of omission that leaves himself open to an E&O claim.
I've had "spirited" exchanges with agents and their managers over a marketing tactic involving beneficiary designations that fits right in this category. One agency was teaching its agents to advise clients that it was "illegal" to name minor children as beneficiaries. Instead, if that was what the client wanted to do, the agent was taught to tell the client that they needed to name an adult who "they believed" would care for the children following the insured's death as the beneficiary.
Then they would make an appointment with that second adult to sell them life insurance on the premise that, "If you died, who would take care of your children and your [brother's/sister's/friend's] children?"
I tried every conceivable way I could think of to get the agency and its agents to understand that whoever is named as beneficiary is the party who gets the death benefit proceeds, and what they choose to do with the money is between them and their conscience. All to no avail. They still teach that marketing tactic to their agents.
I'm sure you and I would agree that it is dead wrong.
Posted: Mon Aug 02, 2010 02:12 am Post Subject:
While giving "legal" or "tax advice") is not something agents are supposed to do, the fact is that agents are called upon all the time by clients to "assist" them in crafting beneficiary designations. Most agents do not realize or appreciate the importance of what they do or lead clients to do, and they often advise clients improperly when it comes to naming beneficiaries.
Yes, but this advice is just the same as asking your great aunt whom you should name as your beneficiary, or whether you should implement a Split-dollar to deduct the premiums from your business's income and only claim the term cost as taxable income for your personal income taxes. Every sales brochure I've ever put my hands on is covered in disclosures that speak to the fact that I do not five legal or financial advice, even if I do have a legal license or an established accounting practice (separate professional liability policy required for that).
Posted: Mon Aug 02, 2010 02:20 am Post Subject:
There would be no need for continuing education courses such as "Beneficiaries and Beneficiary Designations" or "Problematic Beneficiary Designations" if it were not so.
I don't know how they do things in California, but I've never attained a CE course that wasn't a sales pitch wrapped in a CE class.
Even the agents and brokers there knew the game. I remember one I attended about a year ago where a state examiner showed up. It was put on by a well known company who has a particular niche in the field of disability insurance. They brought an underwriter in to discuss the ins and outs of successful field underwriting keeping in mind the inner workings of company underwriting practices. Several attendees kept asking questions about the particular company's specific underwriting requirements--mostly their financial underwriting practices--the person putting on the CE started to address the questions very vaguely, then finally essentially said, look since we have an examiner here and this is CE, I can't mention companies or company specifics.
I also remember one not long after that, which began with the usual question "is there an examiner from the state here?" And since there was none, the sponsors proceeded to pick products and promote their company for two hours.
Posted: Mon Aug 02, 2010 02:23 am Post Subject:
While the premise is correct, that the responsibility to ensure the correctness does not fall on the agent, if the client explains his desire, the agent words it as he thinks he "understands" it but never counsels the client to check with an attorney to verify that it is correct, the agent has committed an act of omission that leaves himself open to an E&O claim.
Again, maybe California is different, but every state I've done business in requires that the client be given the Life Insurance Buyer's Guide either at application or policy delivery. In that guide there is mention of beneficiary designations, which pretty much sums up everything I should have mentioned about appropriate beneficiary designation options.[/u]
Posted: Mon Aug 02, 2010 02:05 pm Post Subject:
but this advice is just the same as asking your great aunt
I'm not going to dispute that at all. My point is that clients ask agents all sorts of questions to which the agent tends to reply -- legal, tax, whatever -- with or without authority.
Even I tend not to respond with, "Understand, I'm not a lawyer . . .", because how difficult is it to answer Mr. Jones' question, "Do I have to name my wife as beneficiary?" At least I don't give out wrong information, like I've heard from other agents, and say something like, "Oh, of course you do . . . California is a community property state."
But if a beneficiary statement is complex, I do two things. (1) After carefully discussing and trying to understand the client's intent, I craft a statement that I believe matches that intent, and we submit it that way, because I certainly am not going to submit an app with no beneficiary statement at all. (2) I let the client know that -- based on my knowledge and experience -- what we've written is "probably" correct, but I advise the client that they have to get a proper opinion from an estate planning attorney to determine if the statement is absolutely correct, and I try to follow up within a couple of weeks to make sure they have done it, or have an appointment to do it, because I don't want it to be wrong.
I don't think the majority of agents take the whole issue of beneficiaries as seriously as I do. (And it's obviously a problem based on the number of posts we see here asking for help with untenable situations.) When I teach a prelicensing class, the topic of beneficiaries is scheduled for about 30-45 minutes (just the bare bones to be able to answer the 3 or 4 questions on the exam). I usually do 60-90, because I want my students to have a better understanding than just what they need to know for the exam.
I realize most other instructors do not have the same concern for the matter, which is why we have agents with little or no concern. Nevertheless, I've handled this section the same way for 10 years, and two different educational providers.
I was recently called upon to update a CE course on "Problematic Beneficiaries", because my part-time employer recognizes my "expertise" in the subject matter, gained in large part from having read law school textbooks on the topic and private discussions with estate planning lawyers, not simply insurance CE courses.
I've never attained a CE course that wasn't a sales pitch wrapped in a CE class.
Neither have I. I get solicitations to attend "events" where I will learn about a company's products and can "earn" a couple of CE units for my attendance. I stay far away from those.
As a matter of fact, the only "live" CE courses I've ever taken were "California Partnership for Long Term Care Insurance", which are required to be able to market the policies, and is not available in any other form. It is definitely not a sales pitch, because it cannot be taught by insurance companies.
Originally, I was doing CE strictly by self-study at a cost of $20-$50 per course. I now do everything (except CPLTCI) online for as little as $20 per year.
We now need a minimum of 24 hours in California, but with mandatory ethics, annuities, LTC, CPLTC, NFIP, and how to estimate replacement cost for homeowner's insurance, I can't do less than about 32-36 hours in my two year license term if I want to do something "just for me" in addition to what the state tells me I must do for me.
every state I've done business in requires that the client be given the Life Insurance Buyer's Guide
Same applies here in California. Usually happens at policy delivery. Because of the timing of the document's delivery, clients don't read it. They purchased a particular life product, so what else do they need to know? (Not an opinion, but an observation.)
But even the mention of beneficiaries in that document is cursory, with the intent, I suppose, of informing the client to meet with an attorney to discuss it. I think even the NAIC realizes that most beneficiaries are going to be "close" to the insured/owner -- spouse or child or parent. Any discussion of regular updating is largely overlooked.
Clients rely on agents for their information and advice . . . if it weren't so, online sales of life insurance would be huge. But even the best online life insurance quoting engines only manage to get something like 15,000 new policies issued for every 10,000,000+ quotes. The best agents close better than 3 out of 4 -- they just can't see 1,000,000 in their careers.
So agents owe their clients a duty of expertise and knowledge. It takes a while to develop both, and the inexperienced agents are the least likely to admit it to their clients, perhaps fearing that their clients will think less of them for it.
Posted: Fri Feb 05, 2010 07:01 pm Post Subject: wording for a minor beneficiary
when you want to have a minor as a beneficiary, what wording do you use to have the insurance or 401k proceeds go to a trust or to name a trustee?
Posted: Fri Feb 05, 2010 08:46 pm Post Subject:
Two different issues here.
401(k) proceeds are controlled under federal law. A person's current spouse is the de facto beneficiary unless he/she signs away that right. A divorced spouse might be entitled via a "court order," but even so, the court order is not really superior to federal law. The new spouse would still have to sign-off on the benefit.
Life insurance is an entirely different matter. Although a few states' beneficiary laws are reminiscent of the 19th century, in most states, a person is free to name anyone or anything as their beneficiary. This includes minor children. However, minors generally do not have the "legal capacity" to manage their own money, and insurance companies will rarely pay any money directly to a minor.
A competent attorney -- one who specializes in wills and trusts -- can help with such a situation as you are describing. If a life insurance trust was created for the benefit of the child(ren), the beneficiary statement would be something like: Primary beneficiary "The John & Mary Smith Irrevocable Life Insurance Trust, dated, February 5, 2010".
Simple. It's the language of the trust document that is all important. That document will define the beneficiary(ies) of the trust, their share of trust assets, who the trustee is, and perhaps detaill when and how the assets of the trust may be paid to or used by/on behalf of the trust beneficiary(ies). This is NOT something that can easily or normally be described in a life insurance policy's beneficiary statement.
You would definitely NOT want to name a (natural/living-breathing) person other than the minor child as the "trustee" because doing so would make the policy proceeds the property of that person, and not that of the child. The child would essentially be powerless to claim against the proceeds. "William Smith (an adult) for the benefit of Tommy Smith (a minor child)" could be used, but is not the best recommendation. What happens if William predeceases the insured or the minor child, and no new beneficiary is named before the insured dies? Turmoil.
Beneficiary statements are among the most important aspects of a life insurance policy, and need to be done correctly, and precisely, to avoid any conflict after it's too late to make any corrections (after the insured's death). This is also one of the least well understood areas of life insurance by agents.
A truly competent attorney, certified in wills, trusts, and/or estate planning, is you're best bet.
Posted: Sun Aug 01, 2010 12:38 am Post Subject: Please help
My 35 year old brother passed away unexpectedly and left his nine year old son behind. At the time of death he had full custody of his son because the biological mother has a serious drug problem. Upon death, custody reverts back to the biological mother.
He was married for less than a year to his new wife who was listed as the primary beneficiary on his life insurance. I am listed as the "second benefactor" on the policy and before he was married I was listed as primary for about 5 years. My brother and I at that time had a verbal agreement that all of the proceeds would be used for my nephew and disbursed throughout his life as needed, (college, car , wedding ETC.) I have recently learned that the new wife has no plans of leaving my nephew any of the life insurance proceeds and also has no interest in maintaining a relationship with my nephew. In fact my nephew went over to the house "his father's house after the funeral and she asked him if she should box up his things for him and she would not let him take any sentimental belongings of his fathers.
My question is how do I contest this life insurance payout and what are my chances of winning?
_________________
Posted: Sun Aug 01, 2010 01:37 am Post Subject:
My question is how do I contest this life insurance payout and what are my chances of winning?
You don't contest the beneficiary, because your chances of winning are about 0.05%. You would have to be able to prove something on the order of coercion or duress to get him to do what he did. The courts are not going to entertain other "thoughts" the owner may have had, because that is only speculation. The beneficiary designation is in writing.
It's unfortunate that your brother chose to take care of his "new wife" and not his son, but apparently that was what he intended when he made her the primary beneficiary, and you the contingent beneficiary. Why he did not list his son in either of those positions only he knows for sure.
If your nephew could prove that his father received bad advice about beneficiaries from the life agent, he might have a claim against the agent, but not the insurance company or the "new wife"/stepmom.
Posted: Sun Aug 01, 2010 02:54 am Post Subject:
If your nephew could prove that his father received bad advice about beneficiaries from the life agent, he might have a claim against the agent, but not the insurance company or the "new wife"/stepmom.
I would say negative. Agents do not give legal advice; this would fall under legal advice in most states. We'd be opening a huge can of worms if someone decided it was the agent's responsibility to ensure that the client had the proper beneficiary designations. That's one of those "in an ideal world" type of situations, but the other things that would have to also exist for that ideal world never will, so no use.
Posted: Mon Aug 02, 2010 12:06 am Post Subject:
Agents do not give legal advice
While giving "legal" or "tax advice") is not something agents are supposed to do, the fact is that agents are called upon all the time by clients to "assist" them in crafting beneficiary designations. Most agents do not realize or appreciate the importance of what they do or lead clients to do, and they often advise clients improperly when it comes to naming beneficiaries.
There would be no need for continuing education courses such as "Beneficiaries and Beneficiary Designations" or "Problematic Beneficiary Designations" if it were not so.
it was the agent's responsibility to ensure that the client had the proper beneficiary designations.
While the premise is correct, that the responsibility to ensure the correctness does not fall on the agent, if the client explains his desire, the agent words it as he thinks he "understands" it but never counsels the client to check with an attorney to verify that it is correct, the agent has committed an act of omission that leaves himself open to an E&O claim.
I've had "spirited" exchanges with agents and their managers over a marketing tactic involving beneficiary designations that fits right in this category. One agency was teaching its agents to advise clients that it was "illegal" to name minor children as beneficiaries. Instead, if that was what the client wanted to do, the agent was taught to tell the client that they needed to name an adult who "they believed" would care for the children following the insured's death as the beneficiary.
Then they would make an appointment with that second adult to sell them life insurance on the premise that, "If you died, who would take care of your children and your [brother's/sister's/friend's] children?"
I tried every conceivable way I could think of to get the agency and its agents to understand that whoever is named as beneficiary is the party who gets the death benefit proceeds, and what they choose to do with the money is between them and their conscience. All to no avail. They still teach that marketing tactic to their agents.
I'm sure you and I would agree that it is dead wrong.
Posted: Mon Aug 02, 2010 02:12 am Post Subject:
While giving "legal" or "tax advice") is not something agents are supposed to do, the fact is that agents are called upon all the time by clients to "assist" them in crafting beneficiary designations. Most agents do not realize or appreciate the importance of what they do or lead clients to do, and they often advise clients improperly when it comes to naming beneficiaries.
Yes, but this advice is just the same as asking your great aunt whom you should name as your beneficiary, or whether you should implement a Split-dollar to deduct the premiums from your business's income and only claim the term cost as taxable income for your personal income taxes. Every sales brochure I've ever put my hands on is covered in disclosures that speak to the fact that I do not five legal or financial advice, even if I do have a legal license or an established accounting practice (separate professional liability policy required for that).
Posted: Mon Aug 02, 2010 02:20 am Post Subject:
There would be no need for continuing education courses such as "Beneficiaries and Beneficiary Designations" or "Problematic Beneficiary Designations" if it were not so.
I don't know how they do things in California, but I've never attained a CE course that wasn't a sales pitch wrapped in a CE class.
Even the agents and brokers there knew the game. I remember one I attended about a year ago where a state examiner showed up. It was put on by a well known company who has a particular niche in the field of disability insurance. They brought an underwriter in to discuss the ins and outs of successful field underwriting keeping in mind the inner workings of company underwriting practices. Several attendees kept asking questions about the particular company's specific underwriting requirements--mostly their financial underwriting practices--the person putting on the CE started to address the questions very vaguely, then finally essentially said, look since we have an examiner here and this is CE, I can't mention companies or company specifics.
I also remember one not long after that, which began with the usual question "is there an examiner from the state here?" And since there was none, the sponsors proceeded to pick products and promote their company for two hours.
Posted: Mon Aug 02, 2010 02:23 am Post Subject:
While the premise is correct, that the responsibility to ensure the correctness does not fall on the agent, if the client explains his desire, the agent words it as he thinks he "understands" it but never counsels the client to check with an attorney to verify that it is correct, the agent has committed an act of omission that leaves himself open to an E&O claim.
Again, maybe California is different, but every state I've done business in requires that the client be given the Life Insurance Buyer's Guide either at application or policy delivery. In that guide there is mention of beneficiary designations, which pretty much sums up everything I should have mentioned about appropriate beneficiary designation options.[/u]
Posted: Mon Aug 02, 2010 02:05 pm Post Subject:
but this advice is just the same as asking your great aunt
I'm not going to dispute that at all. My point is that clients ask agents all sorts of questions to which the agent tends to reply -- legal, tax, whatever -- with or without authority.
Even I tend not to respond with, "Understand, I'm not a lawyer . . .", because how difficult is it to answer Mr. Jones' question, "Do I have to name my wife as beneficiary?" At least I don't give out wrong information, like I've heard from other agents, and say something like, "Oh, of course you do . . . California is a community property state."
But if a beneficiary statement is complex, I do two things. (1) After carefully discussing and trying to understand the client's intent, I craft a statement that I believe matches that intent, and we submit it that way, because I certainly am not going to submit an app with no beneficiary statement at all. (2) I let the client know that -- based on my knowledge and experience -- what we've written is "probably" correct, but I advise the client that they have to get a proper opinion from an estate planning attorney to determine if the statement is absolutely correct, and I try to follow up within a couple of weeks to make sure they have done it, or have an appointment to do it, because I don't want it to be wrong.
I don't think the majority of agents take the whole issue of beneficiaries as seriously as I do. (And it's obviously a problem based on the number of posts we see here asking for help with untenable situations.) When I teach a prelicensing class, the topic of beneficiaries is scheduled for about 30-45 minutes (just the bare bones to be able to answer the 3 or 4 questions on the exam). I usually do 60-90, because I want my students to have a better understanding than just what they need to know for the exam.
I realize most other instructors do not have the same concern for the matter, which is why we have agents with little or no concern. Nevertheless, I've handled this section the same way for 10 years, and two different educational providers.
I was recently called upon to update a CE course on "Problematic Beneficiaries", because my part-time employer recognizes my "expertise" in the subject matter, gained in large part from having read law school textbooks on the topic and private discussions with estate planning lawyers, not simply insurance CE courses.
I've never attained a CE course that wasn't a sales pitch wrapped in a CE class.
Neither have I. I get solicitations to attend "events" where I will learn about a company's products and can "earn" a couple of CE units for my attendance. I stay far away from those.
As a matter of fact, the only "live" CE courses I've ever taken were "California Partnership for Long Term Care Insurance", which are required to be able to market the policies, and is not available in any other form. It is definitely not a sales pitch, because it cannot be taught by insurance companies.
Originally, I was doing CE strictly by self-study at a cost of $20-$50 per course. I now do everything (except CPLTCI) online for as little as $20 per year.
We now need a minimum of 24 hours in California, but with mandatory ethics, annuities, LTC, CPLTC, NFIP, and how to estimate replacement cost for homeowner's insurance, I can't do less than about 32-36 hours in my two year license term if I want to do something "just for me" in addition to what the state tells me I must do for me.
every state I've done business in requires that the client be given the Life Insurance Buyer's Guide
Same applies here in California. Usually happens at policy delivery. Because of the timing of the document's delivery, clients don't read it. They purchased a particular life product, so what else do they need to know? (Not an opinion, but an observation.)
But even the mention of beneficiaries in that document is cursory, with the intent, I suppose, of informing the client to meet with an attorney to discuss it. I think even the NAIC realizes that most beneficiaries are going to be "close" to the insured/owner -- spouse or child or parent. Any discussion of regular updating is largely overlooked.
Clients rely on agents for their information and advice . . . if it weren't so, online sales of life insurance would be huge. But even the best online life insurance quoting engines only manage to get something like 15,000 new policies issued for every 10,000,000+ quotes. The best agents close better than 3 out of 4 -- they just can't see 1,000,000 in their careers.
So agents owe their clients a duty of expertise and knowledge. It takes a while to develop both, and the inexperienced agents are the least likely to admit it to their clients, perhaps fearing that their clients will think less of them for it.
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